Business leaders’ expectations for the fourth quarter soured slightly, according to the University of Colorado Boulder’s quarterly Leeds Business Confidence Index, but they didn’t pan out early next year.
The LBCI looks at six measures — the outlook for Colorado and the US economy, as well as sales, hiring profits and capital expenditure expectations — and tracks how they change over time. A reading below 50 of the index indicates contraction and an expansion above 50 indicates expectations.
Overall expectations were still positive 53.9 as recently as the second quarter, but the index fell sharply to 41.1 in the third quarter, as rising inflation, supply chain constraints, labor shortages and war in Ukraine weighed on sentiment. The outlook for the fourth quarter has eased slightly to 39.8, but it rose to 41 for the first time ever. The outlook for the US and Colorado economies improved between the third and fourth quarters.
But when looking at our own businesses and industry, expectations soften further for the rest of the year.
“Business leaders are clearly indicating that they see weakness in the economy going forward. Leaders see weakness in sales, hiring and capital expenditures. We are getting signs that things are slowing down,” said Richard Wobekind, a senior economist and faculty director in the Leeds Business Research Division, during a news call Thursday morning.
Colorado business leaders remain highly pessimistic about the US economy, with a score of 30.7 compared to the Colorado economy, which had a score of 40. But they see the US economy rebounding somewhat in the first quarter, resulting in a score of 35 versus 40.2 in Colorado.
Wobbekind said a key test for the economy will be whether those who are allowed to go into layoffs and closures can step into some of the open positions that are currently vacant. Employers will be required to keep those positions open when conditions soften.
About 17% of respondents said the recession had begun in the first half of the year, while 45% expected it to start in the second half of 2022 and 15% expected the economic contraction not to occur until the first half of 2023. . ,
Nearly every respondent said their business was being squeezed by inflation, and 57% expected an increase in wages in response. Nearly half expected cost cuts to combat inflation, while 47% planned to pass on higher costs to customers. The Business Research Division at CU expects Colorado inflation to moderate, averaging 8.2% in 2022 and then averaging 4.1% in 2023.